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Ten Things That Everybody Knows About The Foreign Corrupt Practices Act ― And That Aren’t So! PowerPoint Presentation
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Ten Things That Everybody Knows About The Foreign Corrupt Practices Act ― And That Aren’t So!

Ten Things That Everybody Knows About The Foreign Corrupt Practices Act ― And That Aren’t So!

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Ten Things That Everybody Knows About The Foreign Corrupt Practices Act ― And That Aren’t So!

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  1. Ten Things That Everybody Knows About The Foreign Corrupt Practices Act ― And That Aren’t So! Simeon M. Kriesberg Mayer, Brown, Rowe & Maw LLP Washington, D.C. May 23, 2006

  2. Introduction • Twain: “It Ain’t What You Don’t Know that Gets You Into Trouble. It’s What You Know for Sure that Just Ain’t So.” • Worst Case: You are Guided by Your Misconceptions. • Best Practices: You are Guided by Sound Knowledge of What the Law Says and How It is Applied. • Ten Common Misconceptions about the FCPA that Can Cause Real Trouble. 1

  3. 1. The FCPA is an Antibribery Statute. • Apart from Antibribery Provisions, The FCPA Has Accounting Provisions that Provide Independent Grounds for Liability. • Accounting Provisions Include Books and Records Provisions and Internal Controls Provisions. • Books and Records Must Accurately and Fairly Reflect Transactions and Dispositions of Assets. • Internal Controls Must Suffice to Provide Reasonable Assurances that Transactions are Executed in Accordance with Management Authorizations. • Bribery is Not a Predicate for Liability under the Accounting Provisions. 2

  4. 2. The FCPA Bars Americans from Foreign Bribery. • The FCPA is a Species of Securities Law. • Any Issuer of Securities Registered with the SEC is Subject to the FCPA, Regardless of Country of Incorporation. • Foreign Subsidiaries or Joint Ventures of an Issuer, Controlled in Fact by the Issuer, are Also Subject to the FCPA. • Foreign Nationals Who Commit Acts in the United States in Furtherance of Prohibited Activities are Also Subject to the FCPA. 3

  5. 3. The FCPA Bars Bribes of Foreign Government Officials. • The FCPA Bars Bribes Also of Foreign Political Parties, Party Officials, and Candidates. • The FCPA Bars Bribes Also of Officials of Public International Organizations. • The FCPA Bars Bribes Also of These Foreign Parties Even if the Purpose is to Influence U.S. Government Officials. 4

  6. 4. The FCPA Focuses on Payments to Induce a Foreign Official to Do an Unlawful Act. • The FCPA Also Bars Payments to Influence A Lawful Act by a Foreign Official, or to Induce an Official to Refrain from Acting. • The FCPA Also Bars Payments to Secure an Improper Advantage. 5

  7. 5. Compliance with the FCPA Means Not Making Payments to Foreign Officials. • Giving Anything of Value Can Be a Violation: Gifts in Kind, Entertainment, Travel Expenses. • Charitable Donations to an Organization in which a Foreign Official or Official’s Family has an Interest Can be a Violation. 6

  8. 6. The FCPA Bars All Corrupt Payments to Foreign Officials. • The FCPA Includes an Express Exception for Facilitating Payments. • The Exception Applies to Payments Made to Expedite or Secure Performance of Routine Governmental Action. • Obtaining Permits, Scheduling Inspections, Supplying Power and Water, and Unloading Cargo Are Examples. • The Exception Does Not Apply to Decisions to Award or Continue Business. 7

  9. 7. The FCPA is a Unique Burden on American Companies. • As Already Noted, Foreign Issuers are As Much Subject to the FCPA as American Companies. • Furthermore, 1997 OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions Has Made the Playing Field More Even. • The Convention Has Been Signed by Major European Countries, Japan, Korea, Mexico, Argentina, Brazil, Chile, and Others. 8

  10. 8. In Case of FCPA Penalties, Individuals Can Look to Corporate Indemnification. • The FCPA Expressly Bars Indemnification of Individuals Who Are Penalized. • Penalties Can Be Severe: $10,000 Civil Fine for Entities and Individuals, $100,000 Criminal Fine and Up to Five Years in Prison for Individuals, $2 Million Criminal Fine for Entities, Plus Other Related Statutes (RICO, Mail and Wire Fraud), Plus Debarment from Government Contracts and Denial of Export Licenses. • There is No Indemnification for Reputational Damage. 9

  11. 9. Corrupt Intent is Crucial to Liability under the FCPA. • Although the Antibribery Provisions Refer to Corrupt Purposes, Intent is Inferred from the Circumstances, Regardless of Direct Evidence. • Furthermore, the Accounting Provisions May Be Invoked Even in the Absence of Corrupt Intent (or in the Absence of Questionable Payments). 10

  12. 10. The Enforcement Agencies Will Never Discover What a Foreign Agent Did in Some Remote Country. • Competitors and Former Employees Are a Fertile Source of Information to Enforcement Agencies. • Thanks to Sarbanes-Oxley Act, SEC Resources for FCPA Enforcement are Extensive. • The Use of FCPA Allegations and “Whistle-Blowing” as a Weapon in Private Litigation against a Corporation by a Disgruntled Former Employee is Increasingly Common. 11

  13. Conclusion • An Effective FCPA Compliance Program Should Ensure that All Relevant Employees and Agents, at Home and Abroad, Separate FCPA Misconceptions from Reality. • That Should Help Your Company to Avoid Trouble from What You Don’t Know As Well As From “What You Know for Sure that Just Ain’t So.” 12